Cheaper iPhone: Apple Working on Model to Fight Off Smartphone Competitors

Apple is working on a less expensive model of the iPhone which could come later this year, according to the Wall Street Journal.

The lower-end version, an alternative to Apple's existing smartphone, would resemble the standard model but with a different, less expensive body, sources say. The new iPhone could have a plastic shell instead of the aluminum body it has now. Many other parts could remain the same or be recycled from older iPhone models.

The iPhone 5, which starts at $199 and costs up to $399 (depending on amount of digital storage), was released in September and was one of the hottest selling items this holiday season. However, the iPhone 5 is facing pressure from cheaper Android and Windows phones, its most competitive consumer market yet.

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Mashable reported in November that Samsung's Galaxy S III has reclaimed Apple's previously-held crown of most popular smartphone in the world. That was during Q3. In Q4, Apple edged out Samsung, selling 37 million iPhones, while Samsung sold 36 million, according to IDC.

With the tech companies neck-and-neck at the end of each quarter, analysts are looking toward the next batch of numbers, which encompasses the past holiday season. Those figures will come out later this month.

Rob Cihra of Evercore Partners projects that Apple sold 50 million iPhones, a 35 percent year- over-year increase and 86 percent growth from the previous quarter. As far as the newly expanded iPads go, including the new iPad Mini that came out in November, Cihra projects the tech giant sold 24 million touchscreen tablets in the quarter, representing a 56 percent year-over-year growth and a 71 percent boost from the September quarter. He expects iPad sales to be driven by the Mini.

In an effort to attract customers turned off by Apple's high prices, the cheaper model smartphone could help the Cupertino, Calif.-based company reclaim its edge in the smartphone market.

Samsung said on Tuesday that it had its best year yet, with record profits in the past three months, which has Apple executives concerned.

Gene Munster, an analyst with Piper Jaffray, told The Journal that a less expensive iPhone won't necessarily hurt Apple's overall profit margin if it attracts buyers who haven't bought iPhones before and not those who would have been willing to purchase the higher-end device.

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When the late Steve Jobs was at the helm of the company, Apple was known for selling only a few versions of the same product at the higher end of the price spectrum. Since Tim Cook took over as CEO in August 2011, that has started to change, especially with the advent of the iPad Mini.